1. On a scale of 1 – 10 how would you say you feel about the year ahead?

BREXIT amongst other things have certainly dented your confidence as over the past two years you have consistently scored 7.3. This time around you are 10% more gloomy this time around and gloomier about the year ahead when compared with all other UK distribution channels.

When we asked other distribution channels how positive they felt, this is how they scored and how their score has changed over the past 6-12 months.

2. What do you consider are the 3 biggest issues facing your business and/or industry?

The following have been listed in priority order in terms of what is keeping you up at night. The numbers in brackets illustrate if the point was made multiple times.

Competition– From within the industry and new entrants in a digitalised world

Technology- Millennials trust in tech

Fear of change– Inertia

Lack of agility - Inability to move to an agile business model

Lack of transparency– Charges and clients not understanding what they get for what they pay for

Reputational damage

YOUR BUSINESS MODEL – WHO’S IN THE ROOM

1. Please define your business

There are an array of business models represented at A Meeting of Minds totalling circa £258.8bn AUM.

2. What model have you adopted in the post-RDR world?

There has been a marked increase in the number of Restricted (limited and multi tie) business models.

3. How do you typically charge for providing investment advice to your clients?

On average…

Adviser charge per hour = £412.50/hr

Adviser charge as a percentage of investment = 95.5 bps

4.What do you believe are the most important value drives when pricing up an adviser business?

What are the most important value drives when pricing up an adviser business?

Your reputation; relationship management; and the calibre of your people continue to be the three top reasons why clients chose to do business with you.

Your value on independence continues to rise.

5.What are the most important value drives when pricing up an adviser business

‘Profitability’ and ‘having a high proportion of recurring revenue’ continue to be in the top most three important value drivers. However, ‘synergy potential’ has shot up the ranks to become the second most important value driver.

This year, Wealth Managers are lest interested in ‘demonstrable asset under influence’ and ‘growth potential’.

How does this compare with last year and how Financial Advisers ranked the value drivers of their own businesses?

VALUE DRIVERS

Rank (and weighted score)

Wealth Managers & Private Banks

Financial Advisers (2016)

Nov-16

Jun-16

Nov-15

Southern

Northern

Profitability

1 (87)

1 (109)

1 (83)

1 (163)

1 (164)

Synergy potential

2 (84)

5 (73)

7 (46)

5 (100)

6 (87)

High proportion of recurring income

3 (68)

6 (72)

2 (64)

2 (153)

3 (133)

Demonstrable assets under influence

4 (63)

2= (105)

3 (63)

3 (130)

2 (135)

Scalable business model

5 (61)

8 (65)

5 (52)

9 (48)

8 (56)

Growth potential

6 (54)

2= (105)

6 (51)

4 (105)

4 (123)

Client base - portfolio size

7 (44)

4 (76)

4 (59)

6 (99)

5 (102)

High RM / adviser productivity

8 (31)

11 (26)

9 (30)

10 (43)

13 (29)

Level of adviser qualification/training

9 (29)

13 (12)

12 (9)

8 (58)

10= (47)

Proportion of fee income

10 (28)

10 (29)

11 (12)

7 (77)

7 (72)

Strength and ambition of management

11 (28)

7 (67)

8 (43)

11= (40)

9 (54)

Brand

12 (21)

9 (50)

10 (19)

11= (40)

10= (47)

Level of debt

13 (21)

12 (17)

15 (1)

13 (26)

12 (34)

Track record of consolidation

14 (16)

16 (5)

13 (5)

15= (7)

16 (6)

Salary/bonus model

15 (13)

15 (8)

14 (3)

14 (20)

14 (20)

Proportion of on-line business

16 (0)

14 (11)

16 (0)

15= (7)

15 (7)

12.How did your business numbers change over the past year?

2016 has been a great year with more groups experiencing rising AUM; revenues; and client numbers. However, costs continue to rise and the rate of headcount growth is slowing.

How does this compare to how you thought you would do 12 months ago…

Not bad… pretty similar!

13.How do you expect your business numbers to change over the next year?

Looking into 2017, costs will continue to rise and back office headcount will stabalise. But this will be countered by rising client numbers, AUM an revenues… hurrah! And you are feeling more bullish about the year ahead, than you were this time last year.

14.The value chain… who will be the winners and losers? Please indicate whether you feel whether the various parts of the value chain will grow or shrink over the next 2-3 years.

In terms of how this compares with other distribution channels:

WEARING YOUR POLITICAL & REGULATORY HAT

1. If you were Chancellor for the day, what three things would you change?

Tax

o Abolish IHT

o Merge NI and Income Tax. Invest in infrastructure.

o Reduce capital gains tax

o Reduce IHT burden. Change CGT to long term and short term.

o Reduce SDLT from the extortionate level it is at today, look at simplifying the current tax system, abolish inheritance tax.

o Clarity on the longer term direction of taxation

o Make the tax system much less complicated.

o Inheritance tax

o Regulation and Tax holiday: no policy changes for 2 years. Create a least a small period of stability and avoid the constant annual changes, in advance of the wrenching changes likely to result from the Brexit process.

o Simplify the tax system

o Tax and pension simplification

o Address various fiscal stimulation options rather than leaning on monetary tools to prime growth.

Housing

o House building policy

o Remove stamp duty

Brexit

o Create clarity & stability for Banks in this new Brexit era

o The Brexit vote

Capital Requirementsfor small private banks

2.If you were in charge of the regulator for the day, what do you think should be at the top of the in tray?

Consistent and clear communication

o Clarity of purpose – Fewer laws, greater sustainability

o Produce a business plan and publish it

o Clearer guidance and more visible enforcement actions.

o Consistency in the UK across ALL financial services. Then across the globe.

o A more consultative approach. The current thematic drives of the FCA are not necessarily resulting in the best outcomes for clients but instead creating an ever spiralling mountain of paperwork which is leading to rising costs and customer frustration.

o Better direct communication with firms

o Get out and meet firms

Understand the impact and burden of regulation

o Return on investment - what is the marginal benefit in terms of the regulator's key objectives relative to the cost/effort incurred by the industry (and the regulator itself) in implementing new regulation.

o Understand the enormous time and financial costs that all the new regulation is resulting in

o Practicalities of regulation and how to help the industry improve its reputation.

o Fees and charges

Europe

o Impact of possible Brexit

o Create harmonised rules throughout Europe

Clarity - Produce a business plan and publish it

Retail investors

o Ensuring more retail investors get access to capital markets products without being ripped off or having to do DIY investing

o The death of advice for the mass affluent

Ensure clients are receiving good outcomes

Proportionate and client-specific regulation

On boarding clients

Understand digital

Influence on government policy

3.Regulation readiness barometer

(The higher the score, the higher the readiness. Participants we asked to rate their level of readiness from 1-5.)

The regulatory balance has shifted from providing much needed client protection to being an obstacle to advice and a burden that adds both cost and complexity to the investment process in the eyes of clients. That balance needs to be re-set.

Impact on time and cost

o It makes business slow

o Time spent on general compliance issues.

o More time-consuming processes, more documentation, less client-friendly while not achieving a higher level of confidence in a favourable outcome for client or the business.

It has helped us to focus on improving processes and procedures to be far more efficient and effective. This is beneficial to both the client and the firm.

Suitability

o Much more intense scrutiny of suitability and ongoing suitability reviews.

o Changes made to pre and post trade compliance, enhancement of suitability reviews, investment in tech to support suitability advice

o The increased awareness on suitability has helped us tailor our portfolio construction to meet clients' investment needs. Regular suitability reviews have also helped us engage clients on a more frequent basis, thus furthering the relationship.

Moving to sophisticated client base and away from retail based clients

More advisers want us to run portfolios on third party platforms as opposed to directly.

Our portfolio management systems have always incorporated suitability but regulation has made this more demonstrable in both internal & client reporting.

Repricing of services across advice and fund management.

Separation of cherished holdings and other XO assets from managed funds.

Re-papering.

A gradually more structured approach

Considerably - systems, behaviours, monitoring

Not particularly impacted

There hasn't been much change as we already had the systems in place.

5.What are you most fearful about for your business once Article 50 is pushed?

Loss of passporting

o How long time it will take until we get clarity on passporting opportunities

o Exit of business from London due to lack of passporting.

o Cross-border blocks.

Long term economic impact

Continued lower interest rates

Flat rate of taxation

Less non doms in the UK.

No results after 2 years and brain drain from UK

Poor negotiations leading to no equivalence and increased cost of business.

Ability to use EU approved product UCITS etc in the UK

A number were neutral and not fearful

6.What would be the biggest gains/opportunities that BREXIT could offer your business?

Reduction in complexity and volume of regulation

Britain free of the deadening influence of the EU

Geo-political diversification under a solid and transparent regulatory regime

More U/HNWI will see the UK as a safe haven which will create more business opportunities

Weaker Sterling attracting foreign investment in the UK

Trading / FX revenue increase on volatility.

Many were unable to list specific opportunities because there was not enough clarity at the moment or they did not feel things would change much (if at all).

7.When lobbying Brussels, what would be your red lines/must-haves?

Passporting of services was the biggest must-have

Single market access

Single Passport for European mutual funds run from the UK

Equivalence, grace periods, grandfathering, cross-border

Free movement of people, free market access

Best access to the UK market as possible.

Control of borders, control of law making.

Brexit

Delay tactics until UK general election in 2020, when 'the question can be reasked in manifesto form

11.What percentage of your business is discretionary, advisory or execution only?

13.Please describe briefly areas of specialist investment opportunity which you and your clients are interested in?

Structured investments in Absolute returns

Property and debt based securities

Infrastructure Funds

Genuine Absolute Return.

We have the ability to invest across all geographies and asset classes - both open and closed ended. Our clients get portfolios using both on and offshore funds. Our models are solution driven and therefore we are all analysts as well as managers and can invest across the gamut of funds on offer

Private equity (2)

Certain aspects of commercial property, residential property and various VC and PE ventures.

Real estate

Closed end specialist funds

Closed Ended Funds

Alternative income / liquid hedge funds / smart beta

Generalist

Infrastructure

14.When selling to your clients, if you could have anything under the sky what would be top of your wish list?

High performance, low risk and superb income on a regular basis

State of the art technology embracing the traditional values of the firm but highlighting its progress into the 21st century.

o Cold emails or mailshots - Sending unsolicited emails. Even in 2015 with access to a wide source of information, recognise that a professional salesman really can add value to the relationship we have with providers.

o I would focus on brand awareness, raising the profile of the company and sending a clear simple message.

o Less emails more thought leadership/ better macro commentary

o Deluging me with emails and hard-copy reports/literature

o Marketing material and NON-manager presentations

Start:..

o Positive returns in any market conditions

o First thing is to work for a credible firm with a clear USP. Next is to speak to the research team.

o I would start by asking what we are looking for rather than telling us

Owen James Group

Owen James seeks to provide a platform for strategic engagement: an opportunity for key individuals to discuss and understand the business and investment issues which are affecting the whole of their industry. The end game being to enable firms to do better business - commercially, intelligently and ethically.